Workers Need to Turn Retirement Saving Knowledge into Action

Americans
do appear to have a fair understanding of certain personal finance concepts, and
both workers and retirees agreed that they place a high degree of importance on
taking key steps to save and plan for retirement, according to findings of the
Voya Retire Ready Index. However, when asked to identify the financial planning
activities they had already taken, only a minority reported completing some of
the primary measures that can lead to improved retirement outcomes.

A
majority of workers and retirees indicated it was extremely or very important
to create a holistic financial plan (87% of workers and 73% of retirees) and determine
the amount of future monthly income their current savings would produce (85%
and 71%). Yet, only 31% of workers and 35% of retirees have a written budget, only
36% of workers and 31% of retirees have used a web-based retirement calculator
and only 17% of workers and 26% of retirees have a formal written financial
plan.

In
addition to doing too little planning, workers and retirees are also not saving
enough and may not have enough financial protection, the study found. Nearly
half of workers (48%) and more than one-in-five retirees (21%) reported having
less than $49,000 in total savings and investments. Approximately one-in-ten
from both groups were not even sure how much they currently had in total
savings and investments.

Lower levels of
savings translated into higher concerns about covering their expenses in
retirement. More than one-quarter of retirees (27%) and nearly six-in-ten (59%)
workers were extremely or very concerned about outliving their savings. Workers
expressed similarly high concerns about being unable to pay for their health care
expenses (61%) and being a burden on their family members (51%).

The
Voya Retire Ready Index was designed on the premise that successful retirement
preparation involves three important components: 1) sufficient knowledge and
awareness of how to prepare (“knowing”); 2) accurate and comprehensive planning
activity (“planning”); and 3) adequate savings to generate sufficient income
replacement (“having”). The study incorporated two surveys that were conducted
with Greenwald & Associates, Inc. The surveys asked current workers (the
“Workers”) and recent retirees (the “Retirees”) a series of questions related
to these three retirement readiness components. Using the survey results,
scores were calculated on a scale from zero to ten in each category, and then
again on an overall basis to come up with a combined score.

The
findings show how Americans are generally behind in their readiness, and that
planning represents their most significant hurdle as well as the area with the
most opportunity for improvement. Workers who were surveyed for the Voya Retire
Ready Index averaged an overall score of 4.1 out of ten, while retirees
averaged a 5.5.

Despite
scoring in the low to middle range on the Voya Retire Ready Index, both workers
and retirees reported a high level of confidence in their financial
preparedness to live securely throughout retirement. The study pointed to some
gaps between the current perceptions many had about their retirement security
and what they ultimately might experience. This included how long they expect
to live in retirement and how long they expect the income from their personal
assets to last.

Nearly
two-thirds of workers (65%) and eight-in-ten retirees (82%) reported feeling at
least somewhat confident in their ability to live securely throughout retirement.
However, nearly six-in-ten workers (59%) were extremely or very concerned about
outliving their savings. And while almost two-thirds (65%) of retirees expected
to live more than 20 years in retirement, only four-in-ten (40%) believed their
savings would last beyond 20 years.